Q3 2020 New Senior Investment Group Inc Earnings Call

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Good morning, and welcome to the New Senior investment Group third quarter 2020 earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one or your Touchtone phone.

To withdraw your question. Please press Star then two please note that this event is being recorded I would now like to turn the conference over to Jane Brew Managing director. Please go ahead ma'am.

Good morning, and welcome you see here, earning call for the third quarter of 2000.

With me today are even given our CEO, Rob I'll tell Ya finance and accounting and Orange County, Yes.

Oh.

Before I turn the call over to see that I'd like to highlight this morning, I really property out they are [laughter] affiliations of GAAP and non-GAAP financial measure can be found on our website senior I eat [laughter].

Before we begin I see no alcohol exclusively focused on non-GAAP, EPS or unless otherwise indicated.

During this call we will make forward looking statements as defined in the private Securities Litigation Reform Act, making they buy.

No forward looking statement can be guaranteed and actual results may differ materially from those projected it.

Oh It wasn't statements made on this call will be evaluated together with the risks and uncertainties that affect our fifth that particularly those disclosed in the risk factors and other disclosures in our most recent annual and quarterly reports filed with the S.D., including the form 10-Q that will be filed later today.

We undertake no obligation to publicly update or that will be bad weather as a result of new information future events or otherwise and now I'd like to turn the call over to our CEO.

[laughter].

Hi, Andy joining new senior <unk> earnings call for the third quarter of 2020.

[laughter], we posted a presentation to our website this morning, which I will be referencing throughout my Uh huh.

[laughter] upbeat on the status of cold in many cases in our portfolio key observations on friends throughout the pandemic and finally details on our financial results for the third quarter and expectation for full year, 2020, and why and Oh.

We are nearly eight months instead of COVID-19 pandemic and the bulk of our time energy and focus continues to be understanding <unk> ongoing impact on our 103 community and positioning ourselves as best we can for the future.

We have now completed two full quarters since the start of the pandemic and Apple has progressed, we have continued to gain better insight and perspectives from the trends that we have observed.

It's clear that the virus is not going away in the near term and we have learned that our operators must continuously adapt their operational strategy to deliver the best possible run [laughter] experience, while balancing health and see.

We have worked closely with our operators to minimize as best as possible the impact to our community operation into our overall financial result.

In addition, we continue to be sure you need to work independent living properties that have allowed our operators to adjust protocol within our community and effectively manage the spread of the virus, while also reducing expenses in response to lower occupancy level.

As a result, our financial performance has held up and our results for the third quarter came in at the high end of our expectation.

Well it remains difficult to predict how long the pandemic well in our community and when a full recovery will start or what form it will take you to be encouraged by the recent trends that we were seeing.

Occupancy trends in the third quarter improved significantly up compared to the second quarter and while overall occupancy has continued to decline the magnitude of the decline seems to be slowing in October occupancy is currently pacing to be the smallest monthly decline started in Canada.

As I said for each of the past few quarters now our goal has been to control what things, we can control and to be as transparent as possible along.

Along those line last quarter, we provided rod revised expectations for the year and now with only a couple of months remaining in the year. We are further narrowing and increasing our expectation for full year 2020, and why they AFFO.

At this point, we're expecting full year 2028, I'm about to exceed our free Kobe AFFO expectation.

Well certainly not the way we didnt had envisioned at the start of the year, we believe to be the resilience of our portfolio the flexibility of our operating partners and prudent balance sheet management that allowed us to benefit from a declining interest rate environment.

Now I will briefly provide an update on what we're seeing our community and then I'll touch on some key trends before I turn it over to Rob to discuss the financial results in more detail.

Let me start with an update on the status of cold and my team within our community.

Since the start of a pandemic our operators have taken difficult, but necessary steps to protect their residents and staff in our community.

And we believe that these measures have helped limit in production and spread of the virus in many of our communities.

As of Wednesday, our operators have reported 41 active cases across 14 properties, including three for residents and seven minutes okay.

Overall, the weekly number of new cases within our communities has remained relatively low and have averaged about six new cases per week across our entire portfolio.

The rate of new pieces within our portfolio has generally tracked broader trends in the markets where communities are located as well as nationwide friend.

For example, new cases slow significantly in May and June and an increase in July in line with national trend.

More recently as the rate of new cases across the country have gone up the rate of new cases in our portfolio has also increased.

However, so far the spreads within our properties has remained relatively low as 10 of the 14 currently impacted properties only have one active Kate.

Additionally, nearly 60% of the property in our portfolio have not recorded a single rather than take today.

Since the start of the pandemic our properties have gone through a series of protocol fall into three general timeframe.

The first day began in March at the outset of a pandemic when our operators quickly implemented significant safety measures, including the closing of dining room and wishing to in room Yodle and route restricting access to our communities to a central visitors lonely and stopping all in person sales activity.

The second Big began in May when our operators rights are with prescription in a phased approach based on the status of state and local regulation as well as the status of cobot cases that the property.

And the third phase with our operators have started to roll out in the past few weeks includes additional restrictions being lifted.

It is important to highlight that while this crusade allow for more resident engagement and socialization. The community do continue to operate with restrictions in place and we anticipate that this will continue for the foreseeable future.

The service is typically offered in our communities, including communal dining group activities and outside person visits are an essential part of the physical and mental wellbeing of the residents in our communities and they are often among the main reason why rather than choose to live in our communities.

Our operators are focused on maximizing redness engagement as much as possible during this period.

However, the ongoing operator protocol, which continue to prioritize recommended the protocol such as social distancing and limited social gathering you required document continued to operate with more research and then the free press can dynamic operating environment.

As the pandemic moves through its eighth month, we continue to work closely with our operators to strikes a critically important balance between competing needs of health and safety and socialization for our residents.

Now I want to spend a little time going through some of the key trends related to occupancy in expenses.

Overall, we continue to believe that certain attributes that are unique to our independent living portfolio has helped limit our occupancy decline and mitigate the severity of around a wide decline.

On the occupancy side lead in move in volumes have increased substantially from the second quarter LOE as restrictions have been here and our operators have adopted new sales strategies in response to the pandemic.

Importantly, we have been improving interest from our target middle market I, all residents demographic, which demonstrates that there continues to be strong demand for our products.

Total portfolio occupancy declined declined a 160 basis points sequentially in the third quarter. This was a significant improvement from the 250 basis point sequential decline experienced in the second quarter.

The occupancy declines in March and April were the most severe and averaged 125 basis points a month.

Since may we have seen the trends improved in the portfolio has experienced consistent monthly declines of approximately 60 basis points.

As I mentioned earlier October occupancy is currently on pace for the lowest monthly decline since it started the pandemic with the projected decline of 40 basis point.

Monthly lease and move in trends have continued to increase from their low points in April.

Overall monthly lease increased 31% in the third quarter versus the second quarter in September These increased 67% from the low point in April monthly.

Monthly move and increased 47% in the third fourth quarter versus the second quarter and September who then increased 106% from the low point in April.

As we look to our homework movies are pacing to grow month over month and leaves are expected to surpass the 2019 averages for the first time in 2020.

While our move ins have steadily increased our move outs have also increased.

Hello move out volume remained below historical levels throughout the second quarter as we saw a voluntary move out come down.

However over the past four month move outs have trended above historical averages.

Move outs increased 20% in the third quarter versus the second quarter in September move outs increased 27% from the low in April.

As a result move outs have continued to outpace moving.

While we expected move outs to increase from their historically low levels in the second quarter in recent months, we have seen an uptick in the number of residents, citing kobin restriction as the primary reason for moving out.

This is something that our operators are closely monitoring and they continue to safely with further restrictions within the community.

On the expense side, we have continued to benefit from a flexible cost structure and an occupancy has gone down our operators have been able to successfully reduce expenses by flexing staffing schedule supply cost and maintenance costs.

I think it is much harder to do it starting with health care as.

As a result, our margins have continued to hold steady at around 40%.

In addition, cobot expenses have steadily decrease as our operators have developed more efficient method for managing the pop.

As we move forward, we expect certain kobin related expenses will remain in place as our operators continue to implement protective measures within the community.

Importantly, these expenses couldn't varied by community and there could be new expenses as a pandemic continues to a ball. Nonetheless, we have confidence our operators will continue to manage overall expenses well and remain focused on driving property performance, while ensuring safety for all residents that.

Before I conclude I would like to thank our operators and associates at our community who continue to battle the effect of Copa 19, and worked tirelessly to ensure the safety and wellness of all the residents in our communities.

They remain steadfast in their dedication to their mission and for that matter deeply grateful.

Now more than ever I am pleased by our team and our operators have continued to be resilient and flexible and how they have adapted to the challenges that have arisen.

The path of hands and it remains uncertain, making it difficult to predict how the virus will continue to impact our residents associate associates in community operation. Nonetheless, we continue to believe in the value that our communities provide the middle market demographic as well as the powerful long term fundamentals of the overall senior housing industry.

With that let me turn it over to Bob.

Thanks, Susan and thanks, everyone for joining us on the call. This morning.

As we enter the third quarter, our portfolio was comprised of 100 entries private pay senior housing properties across 36 states over.

Overall, we are pleased with our operating and financial results for the third quarter, which came in at the top end up our expectation.

Same store cash NOI for our portfolio of 103 assets for the third quarter of 2027.

7.6% compared to the third quarter of 2019.

The decline relative to the same period last year was driven by a decline in occupancy since the beginning of the panda.

He began to current quarter with occupancy 400 basis points below that at the beginning of the third quarter of 2019.

Expenses were lower by 1.4% year over year due to the decline in occupancy related and other controllable items. Despite incremental expenses of 2.8 million during the current quarter, specifically related to quote protocols implemented by our operators to correct and control the spread across our properties.

Excluding the incremental cold related expenses expenses declined by 3% year over year.

After factoring in the results for the first two quarters of 2020 year today total same store cash NOI was down 3.6%.

We did not begin to feel the impact of the pandemic until the very end of the first quarter. As a result same store cash NOI was up slightly during the first quarter and going down to 3.1% during the second quarter on a year over year basis.

On a sequential basis, ending occupancy declined by 160 basis points in the quarter, a meaningful improvement from the 250 basis point sequential decline in Q2.

While we have seen an increase in move outs versus the historically low levels. In Q2, we are encouraged by the uptake in both lease and leasing volume in the quarter.

These trends have further improved in October and you're expecting a 40 basis point decline in occupancy month over month, which will be the smallest monthly decline since the start of the panda.

Our operators continue to tightly control costs in particular, who would really costs were down by over 40% quarter over quarter as they were able to move to more cost effective alternatives to annual guidance supplies and third party cleaning services.

Total expenses did increase sequentially, mainly due to the impact of typical seasonality that drove higher utility expense.

Now I will discuss our financial results balance sheet and our expectations for the remainder of 2020.

If AFFO for the third quarter was 14.4 million or 17 cents per diluted share compared to 19 cents per diluted share for the second quarter.

If it's all includes approximately $28 million of additional expenses, specifically related to the impact of cool.

The decline is AFFO was entirely driven by the decrease in cash NOI, we just discussed.

Offsetting some of the decline was interest expense, which was down 1.7 million as average LIBOR for the quarter was 16 basis points, a decline of 34 basis points versus the previous quarter.

After closely monitoring LIBOR since the start of the pandemic and the flywheel close to historic lows, we successfully executed a five year 270 million interest rate swaps at the end of August that increase a fixed component of our capital structure from 52% to 72%.

After incorporating the impact of the swaps the weighted average interest rate on our total debt is 2.5%.

We are pleased with the execution, which locks in Norway, and we'll keep interest costs, though while reducing earnings volatility.

Also another example of our continued focus on balance sheet optimization.

We continue to be better positioned from a liquidity standpoint, as a reminder, at the start of the pandemic, we drew on our revolver, given overall uncertainty and market volatility.

We repaid the remaining balance of $60 million on our revolving credit facility during the quarter.

The facility fully Undrawn, we now have access to total liquidity of approximately 160 million.

Additionally, we have no near term debt maturities weighted average maturity of our debt is 5.6 years and US next significant maturity is not until 2025, who are writing us with a great deal of financial flexibility to navigate through the current environment.

No I want to provide some color on our latest expectations for full year 2020, as we are raising our full year 2020 expectation.

With three quarters of the year completed third quarter results coming in at the top end of our expectations and recent operating trends. We currently expect full year same store cash NOI down 4% to 6% an improvement over our previous expectation of 4.5% to 7.5% we shared with you last quarter.

We analyze improvement along with our expectation that labor will continue at the current levels, resulting in an increase in our as opposed to 69 cents to 72 cents per share, which is slightly higher than our previous expectation of 67 cents to 71 cents per share.

Lastly on October 20, Eightth, our board of directors declared a dividend of 6.5 cents per share the dividend will be paid on December 18 to holders of record on December 4th.

With that I will turn the call over to the operator to open the line for questions.

Thank you. Thank you.

We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.

And our first question will come from will come from Vikram Malhotra with Morgan Stanley. Please go ahead.

Hi, Thanks for taking the questions.

Morning, everyone.

Your first question.

I mean, maybe just first question on the need improvement said and just sort of the he does it increase kind of interest I'm. Just wondering if there's any data you can share with tenet leads to converge and how that may have trended over the last call. It.

Six months or so and then just on the move out it was interesting sort of you indicated gold would be one of the Oh.

We then had that gently increase and is there any difference in kind of move out reasoning by by region or property type or anything else you can share that'd be great. Thanks.

Sure. So let me start with a question on conversion rates or the conversion rate as we've seen have moved around a bit kind of depending on where we stand and the plant the handbag. So.

You know there there hasn't been a whole lot of symmetry, but overall conversion rates are down a little bit this year versus what we've seen in the past, but it's something we've been carefully monitoring it hasn't come down significantly. So what we are seeing is that it's taking a little bit longer to convert leads and.

So some of that is happened due to the restriction so it isn't harder for people to kind of.

For all he move but you know that really kind of the most notable thing we've seen so far and overall conversion rate have have not materially move from historical level and Ilene. You know we are just really seeing that our operators I'm happy.

Taking the time to adjust in to figure out how to sell more effectively in light of an environment and the virus isn't going away anytime soon so I think that that's sort of consistent with what we had at least seen across the industry that the operators are really trying to be proactive.

To and make sure that it can move people into safely, but you know adopt new sales strategies to be able to address the environment that we're in on a move outside we haven't really seen anything that is no varies by region necessarily so I don't think there's any pattern on.

That never you can point out there you know it's interesting because we obviously didnt track Kobe. Another reason for move out prior to the pandemic. So it's something that we really started to look at in the last couple of months and we are seeing and in some cases residents site the restrictions from Coke batteries.

And for moving out and if you you know you take some of those move outs away very much in line, if not below kind of historical move out level, it's not something we're entirely the cry spike given the length of the pandemic and given the fact that this has continued and restrictions to some degree have remained in place.

We also have been closely monitoring other move out reasons and those have really been in line with historical averages and so we haven't seen a big uptick for the reasons that you would normally see so so we feel like that's a positive that trends are pretty consistent other than you know we do have people setting Kobe.

And the restrictions as a as a reason for move out.

Okay. That's a that's helpful and then just one more.

You know rep for sort of held up well was up 1% I'm just wondering sort of as you.

In terms of the winter months, the flu season, but but also into 21, just kind of your thoughts on the strategy behind getting back the occupancy.

And using sort of pricing as a lever or discounting as a lever just how do you think that the interplay with occupancy over the over the next call. It six to 12 months Yeah. It's a great question and as you can imagine this is something we spend a whole lot of time talking to our operators about you know thought it's critically important that rapport.

Or no hold and grow that that's kind of how we all think about thing, but I do think in the environment that we're in you know our operators are now, giving concessions and doing some discounts in order to drive occupancy and I think in a normal operating environment that's not.

Energy that you necessarily want to pursue but given the occupancy declines that we've seen I think that the trade off that's worth making and so you know the operators have started to do that and they start to do that in the third quarter and there was some success around that and so I think as we move into the fourth quarter through the fourth quarter and into next year and that will.

Something our operators continue to do but it has to be done very carefully and importantly, you're also seeing that the the anniversary increases have actually held up decently well. So that's a good sign that our existing residents each year. They have they have annual increases.

And there hasn't been a whole lot of no push back on that side of things. So yeah. It's both things its getting new people and it's also ensuring that your existing residents are you know are paying their rents are growing and so I think that in both sides of it. We're obviously closely monitoring but I do think that in some instances.

Discounting and some concessions makes sense, considering where occupancy is.

Great. Thanks, so much and quicker.

Our next question will come from Michael Gorman with BT RG. Please go ahead.

Thanks, Good morning.

Hi, Michael.

I just wanted to go back for a minute to then move ins and the leads and just kind of thinking about that as you mentioned, we're kind of eight months and so I'm. Just wondering if you could give a little bit more color on maybe.

Maybe what the sales strategy is that some of your operators have found success with what it would have they changed or maybe even what are the hearing because obviously of the dichotomy between the move ins and move outs what are they hearing from the potential move ins or the actual movements that have chosen this point and independent make cycles that that they want to commit to an independent.

Being a scenario.

Sure you know I think one thing that has.

Has helped is being able to do more in person a tours and so the fact that we were able to start lifting restrictions across some of our properties in may allow in moderation. Some in person tours that really has helped I think we've all talked a lot in the industry.

Yeah about virtual tours and other things that had been a tool we have looked to but at the end of the day.

These are big decisions for people in our our average length of stay at two and a half years and so residents continue to want to be able to see the property and their families want to see the properties before they move in so I think that's one thing. That's that's notable I think the other thing that our operators have done is they really look.

Very kind of targeted approach to individual communities in individual market. So as as koby. It has has evolved and moves they try to look to communities, where perhaps there's not there's a low incidence rate of coated within a community they develop sales strategies.

That make sure that you know this and try to drive some increased activity. There. So is it being a little bit more specific and targeted on specific communities. As I. Just mentioned there are some concessions that you know our operators are starting to roll out and that that has been helpful. So that you know something as well and then I think.

The other the other thing that I would note is that as the protocols have a malls and and our operators have been able to demonstrate that a resident has been able to be safe and yet Tobin has has appeared in our properties, but I think our operators at this 0.8 months and have a better handle on what works and.

What doesn't and I think that has translated into increased interest from our resident base. So I think people you know now told me they can be saved within independent living communities and they trust. The protocol that are in place and so that led to increased lead activity and then also translated into higher.

Who then so I noticed that a lot, but hopefully a digital additional color no. That's definitely helpful. And then maybe on the just flipping to the move outside and I apologize if I missed this I know you talked about some of the reasoning.

Where are these tenants generally going when they move out at this point are they going home are they moving into it.

Another apartment REIT or are they is there a sense that these are temporary move outs that once the restriction start to ease a little bit they would they would become tenants again or.

Is there any color there that you can give.

Yeah, obviously, that's our hope if someone moves out and now maybe decides to move in with their adult children for a period of time that that would be our hope that they would eventually come back to us, but what we're seeing and again, it's kind of early in terms of analyzing that the people who are exciting co bid as a reason for moving out, but it's a little bit.

A mixed bag I mean, there are some people that are moving home with their their their children are families. We've also seen candidly in some situations people have gone to multifamily where you know there are no. Other services so that would be for a very kind of low acuity residents who don't.

They're really you know one of some of the services that are offered in independent living so that's always the reality that we face in terms of independent living versus say assisted living that you know for some of our residents you know multi family is an option. So we've seen that to some degree, but you know I think that that in few and far between us more people.

Moving on with their families as they have grown you know, it's a long time, where they've had restrictions on who they can't I can't see and other kind of activities. So so it's really it's really that it's more you know family, but in some instances people are looking at it and say you know if I'm getting sort of the same service.

Is you know that I might get multifamily, maybe that's a better option for the time being I will say that we had we had me you know kind of map the trajectory. The pandemic early on you know we did have some people that you know kind of moved out and moved out temporarily in the you know April may timeframe, and we did see some of those people come back.

And so that's a positive sign as we look to what's happening now, but you know I think our job along with our operators is to try to ensure that people feel like they're getting the best out of their experience as they possibly can while also knowing that we have to have certain safety profile.

In place and that now that isn't going to change, but we have to continue to adapt and evolve and our operators have done a good job so far but I have to keep on happening.

Great. Thanks for the color.

Thanks, Michael.

Our next question will come from Daniel Bernstein with capital one. Please go ahead.

Hi, good morning.

Hi, Dan.

Hi.

I guess my question revolves around kind of that.

More of your expectations of.

What were.

The occupancy that's embedded for Fourq two that's embedded in your guidance and then I have a follow up.

On.

Essentially you know, what's the kind of the criteria for restrictions and the risk of further facility restrictions are going to be put back in place in the next month or so given current trends.

Sure. So on the occupancy side, we're we're basically looking at and the remaining months of Q4 being consistent with October so as we all know how things have shifted and can't ship you know kind of pretty quickly, but when you look at you know in November.

Member what's embedded in our you know our projection for the full year is kinda occupancy decline consistent with October so that that's that's kind of where we're landing we didnt do that after things we put out last quarter.

Had slightly worse occupancy assumption for that third quarter. So we actually had me a kind of a better occupancy outcome for the third quarter relative to what we had initially anticipated, but again for the fourth quarter is it's pretty consistent with what we've seen for October.

And I'm sorry, the second question again.

I'm just trying to understand you know that there's obviously, a correlation with occupancy and and the restrictions that are being put in place some facility on us when needed.

I'm trying to just understand you know kind of a you know coming off the trough of Ah.

Koby cases within the pursuing it and looking at your your presentation a trough of cases within the counties surrounding your facilities kind of whats the criteria to reimpose restrictions and just trying to understand that risk because of restrictions are put back in place in the occupancy is not going to be a wedding or with October right.

So we obviously can't predict what's going to happen you know across the nation are in our county entirely with Covance, but what I will say is that our our operators have really focused on the protocols and focused on making sure that the protocol are being followed and so.

To the extent, we see a cobiz case in our communities. They are moving away from a strategy that involves I could be shutting down that facility to a strategy that involves isolating that individual and making sure that it stays very contained and I think when you look at the data.

For our communities in particular, the vast majority of our community agree past cases come up it's been less than three cases within the community and you know this is again relevant we speak about you know kind of independent living we don't know what it's going to look like as we continue to move through that but so far we have seen there just fewer interactions among.

Residents and associates and so when there is a case that popped up it's relatively contained in the protocol can ensure that it stays that way. So the protocol we're maintaining.

Then you know I think the operators feel good that they have the right systems in place of course, if there are dramatic you know shifts and things really changed you know across the U.S. and continue.

At a pace that is not you know workable then our operators are going to have to adopt and consider different strategies, but I will say that you know they now have a decent amount of data look too and they feel confident that they can continue.

Continue to operate without no putting full scale restrictions in place, but you know, it's obviously something well have to watch it.

And then the only other question I have is on oil or turnover.

Which obviously is a huge part of are you seeing your Charleston facility and any.

Any trends on the labor side.

To know whether that's a.

Reduce labor turnover.

You had a wage pressure being a wage pressure coming down.

Just anything you could say there that that that would.

Talk to the labor side the expense equation.

Yeah, I don't think it but anything that particularly noteworthy there I mean, we have had pretty low turnover levels are [laughter] your turnover levels with what we see you know usually and so I think that that's positive and there are some assets, where you know the individuals that you need to factor.

Play that run the communities you know those turnover levels have have been lower in some areas, which is always a very positive thing really when you're in the midst of something like this and so you know I do think that you know unemployment being where it is has a has helped and that as you know benefited businesses like ours.

But overall you know we again, because we don't have health care and workers within our communities. We have not been as susceptible to you know people need to call out sick or all those kinds of things and so you know it's the labor side of it has actually held up pretty well.

All things considered.

Okay.

That's all I have appreciate it thank you.

Thanks, Dan.

Our next question will come from coal Bowzer with Colliers International. Please go ahead.

Hi, good morning.

[laughter].

I'm looking.

Looking at some of the recommendations for the distribution of an eventual coated vaccine it looks like it could be rolled out in four phases. This could change, but my sense is the majority of new senior residents who are the most healthy among the senior housing buckets.

Get access to the vaccine green likely the second phase just just kind of curious whats your senses for when most of your housing population will become vaccinated and we can kind of move forward here [laughter].

Sure I mean look I I, it's hard for me to speculate around a a vaccine and kind of you know availability and distribution of it obviously, but as you pointed out you know at least from what we've seen and heard and then also know from operating the industry seniors will be you know sort of at the front end of any front.

Distribution and within senior housing.

Industry, there are a lot of.

People doing a lot of work and pushing for that to happen very very quickly just giving.

Yeah. The at risk population that we all we offer so I'm hopeful and confident that Nancy said Theres a vaccine at the fact is that our residents and associates I'm, giving kind of important to their job.

Maybe you know very very kind of you know high.

Hi up in the priority list and so I think we believe that you can run the industry. You know believes that and obviously I think just even the you know kind of the emergence of a vaccine will help build confidence and for other seniors as they think about senior housing and looked at senior housing So I think.

There certainly the distribution of the vaccine that's important but I think just the presence in the vaccine will help you know kind of regain some traction across the industry and that's certainly my hope and you know obviously, we we all our fingers crossed that we can get there sooner rather than later.

Sure no definitely and I know sorry, if I missed this but.

Total discretionary capital expenditures have been significantly lower in 2020 for obvious reasons.

Yes, you know.

What sort of metrics is it some of these new fixed cobot related costs or reduce variable I mean, what sort of metrics are you waiting to get to before we can kind of get back to kind of pre coal, but discretionary capital expenditure levels.

In 2021 <unk>.

Sure. So what we did in the second quarter, we Ah we stopped all discretionary capex that we still test spending and they'll have capex spend it was just a discretionary capex that we really tried to pull back and that was won because kind of going into all that we want it to be very conservative.

Over on capital, but it was also that you know given the restrictions that were in place in our communities.

You know, we didn't want people going in and out of our communities unnecessarily. So that's what happened in the second quarter starting in the third quarter. We did began to spend some discretionary capital. So we did see getting that in the third quarter. It for 2020, our discretionary capex will be.

Lower than normal because of the kind of Q2 whole, but we expect it you know kind of pick that up and continue spending as we moved through the fourth quarter and you know as we move into 2021, we expect to be you know kind of right on top of that again. So so so I hope that answers it maybe.

It was a temporary kind of hold but we don't think it's a good strategy to stop.

Stop you know discretionary spend over a long period of time, you really did it one because you know we were wanting to make sure that our kids were safe, but then also as you know kind of capital preservation, yeah, you're going into the depth of this but now weve gotten back to Ed.

Okay, great. Thanks, so much.

Thank you this.

This concludes our question and answer session I would like to turn the conference back over to Ms., Susan Givens for any closing remarks. Please go ahead.

Great well. Thank you everyone for joining us and we will be in touch and look forward to keeping you updated it safe and healthy that's going on.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

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